But for recent trends there has only been one low-end sale in over a year on those four streets, 517 Euclid for $2,079K on 8/8/08. So here is the chart with 219 23rd, $1,880K, 4/9/08, and 370 22nd, $1,600K, 10/7/08, added in red. Are they anomalies or the beginning of a trend down?

3 comments:

You can see some comments on my blog that say it was put on the market by a non-local realtor as a result of a death...

What is happening here is called reversion to the mean - or as I have heard it described, "trees don't grow to the sky". Cycles happen over and over with pretty much all asset classes. This time around, because of the credit bubble, pretty much all asset classes moved together in a highly correlated fashion. Remember about 18 months ago when every stock and stock market seemed expensive? Every piece of real estate (residential and commercial) seemed ultra expensive and way beyond fundamentals? High end art was setting record after record in auctions, corporate profits were setting records for their streak of double digit profit growth, leveraged buyouts were potentially going to be able to target a $100 billion sized deal, etc.

Now you have the exact opposite. Everything has fallen hard over the past twelve months and the fall accelerated over the past two or so (with the exception of this last week). The correlation amongst asset classes has been unusually large on the downside -- why? Because credit has locked up and we are now going through the downswing of the cycle. This really isn't very hard stuff to understand and if you look back in time, it happens over and over...and it happens even in high end, highly desirable areas like 90402.

Lot values peaked well above $2M and it appears they are now materially below $2M. Does that make 90402 affordable? Does it mean the world is ending? No. But the argument by some (many?) that somehow a certain zip code was so special that it could escape the natural forces of a cycle was absolutely nuts. I think the debate about "will prices fall in 90402" is pretty much over. The question now is how much will they fall...I don't think it will be the catastrophe that some of the bears are calling for, but at the same time I don't think it will be the measly 10% correction that some of the bulls hope for (I could argue prices are down 10% or more for a lot of different 90402 properties already).